TDF Asset Growth Off to Good Start in ‘23, Still Below Record ‘21

Target-date fund assets trended up in the year’s first quarter, as the most popular 401(k) investment vehicle continues to rebound from a rough 2022, according to ISS Market Intelligence Simfund, which, like PLANADVISER, is owned by Institutional Shareholder Services Inc.

Total TDF assets in Q1 clocked in at $1.56 trillion, higher than the $1.46 trillion the investment vehicles ended on in Q4 2022, according to data from Simfund put together for PLANADVISER. TDF assets in Q1 were still 12% off 2021’s record high of $1.765 trillion. That upward trend came up against market declines in both stocks and bonds in 2022, even as consumers struggled to save amid rising inflation.

Market watchers, including many in the financial adviser community, are far from certain that things will continue trending up this year, with 65% of advisers predicting a recession before the year is out, according to a recently released survey from Nationwide Mutual Insurance Co.’s retirement institute.

For now, TDF asset growth is trending up year-on-year, a pattern that has only been broken twice going back to 1990, when the then-new “set-it-and-forget” investment started getting a foothold in the retirement savings market. It wasn’t until the global financial crisis of 2008 that TDF assets fell 14% to $156.3 trillion. The TDF market saw its second drop when it fell a slim 2% year-over-year in 2018, as global economies started slowing and the U.S. was engaged in a trade spat with China.

American Funds, Vanguard Capture Most New Inflows

TDF providers American Funds, owned by Capital Group; The Vanguard Group Inc.; and Fidelity Investments brought in the most TDF inflows in Q1, according to Simfund, with American Funds and Vanguard bringing in more than twice as much as any other provider.

TDF Managers With Most Total Assets

The 10 largest managers by overall assets were led by Vanguard, Fidelity and American Funds. As of Q1, Vanguard held a commanding lead, with about 37% of the total market among the top 10 providers. Those managers oversee $1.51 trillion in assets overall, which represents almost the entire of TDF market, according to Simfund.